Why 2 Billion Oranges Will Rot in the Fields

August 9, 1985

The PR firm of Hill & Knowlton recently picked up a difficult assignment -- to whitewash the annual waste of millions of tons of food. Representing an industry group backed by Sunkist and other major citrus growers, Hill & Knowlton is trying to convince consumers that it is in their interest for the Department of Agriculture to keep more than 2 billion Valencia oranges out of their hands this year. Hill & Knowlton's task, observes Washington attorney Jim Moody, is rather like "being the PR firm for OPEC."

Marketing orders, which control production of everything from oranges to lemons to raisins, began as part of an economy-wide attempt to prop up prices during the New Deal. Most of the other federal cartel-setting schemes disappeared along with he Great Depression, but marketing orders lived on despite the end of what Congress termed an "acute economic emergency."

The primary purpose of the regulations is to improve grower earnings by pushing prices up to "parity" levels, based on the farmers' profit margin during the golden days of American agriculture, 1910 to 1914. Since the parity price usually exceeds the market price, USDA has an almost permanent excuse to regulate.

However, early this year the price of navel oranges rose to $9.55 per carton, more than $2 above parity, due in part to record-breaking freezes in Florida. After persistent prodding by some independent growers and the Capital Legal Foundation, a Washington-based free- market public interest law firm, USDA suspended the "prorate" volume restrictions on navel oranges.

For the first time in decades oranges were traded in a competitive market. Within a month the price of a carton of oranges fell nearly one-fifth; Karen Darling, acting assistant secretary for marketing and inspection services, calls the deregulation experience "terrific."

Lifting prorate helped U.S. consumers the most, reducing prices and providing them with an extra 150 or so million navel oranges to eat fresh. Moreover, independent growers who were willing to work for sales earned more; for example, Carl Pescosolido, a longtime opponent of the Sunkist-led cartel, says his profits were up 10 percent.

Of course, producers more comfortable lobbying for government restrictions than marketing oranges were not happy about being forced to compete. Sunkist president Russell Hanlin complains that deregulation prevented the cooperative -- with navel orange revenues running $40 million ahead of 1984 without prorate -- from squeezing even more out of its customers.

The success of the brief free market in oranges has encouraged organizations such as Citizens for a Sound Economy and the newly formed Agriculture for Market Oriented Policies, composed of independent growers, to press for the elimination of all controls. However, reform will not come easy: Hanlin, for one, recently told his members that "we must take a hard line" in support of marketing orders.

And Sunkist has the political muscle to back up its rhetoric. The co-op's Washington lobbyists, representing a heavily Republican constituency from California, have used their White House connections to squelch previous attempts to deregulate citrus pro The growers' influence extends to Capitol Hill too. Policies that force farmers to let mountains of oranges spoil are supported by a Who's Who of congressional liberals, including Alan Cranston, Henry Waxman, Barbara Mikulski, Morris Udall, Louis Stokes, Tony Coelho, Ron Dellums and Leon Panetta -- who once wrote the administration that he was "gravely concerned" over inadequate spending for food assistance.

Sunkist is currently focusing on ensuring that the administration retains prorate on Valencia oranges, which are now in season. Earlier this year the Valencia Orange Administrative Committee, ever concerned about the welfare of the growers who control the committee, recommended a prorate level of 44 percent, which was approved by USDA. Thus, farmers have an "equitable marketing opportunity," as the committee terms it, to sell but 44 percent of their produce fresh to American consumers.

Why did USDA effectively nationalize half the nation's Valencia crop after concluding that deregulation of navel oranges worked so well? A department spokesman says that USDA's decision was "based on economics."

But there is no economic rationale for keeping 2 billion oranges off the fresh market. Instead, the administration is just kowtowing to California agribusiness. Until conservative free-market enthusiasts and liberal champions of the consumer place their professed principles before the votes of agribusiness, food will continue to rot in the fields. The writer is a senior fellow at the Cato Institute.